SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 COMMISSION FILE NO. 2-91651-D PEACOCK FINANCIAL CORPORATION COLORADO 87-0410039 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 248 E. MAIN STREET SAN JACINTO, CA. 92583 (ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES) (909) 487-8911 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] YES [ ] NO Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. COMMON STOCK 10,695,295 SHARES OUTSTANDING $0.001 PAR VALUE AS OF MARCH 31, 1997 PEACOCK FINANCIAL CORPORATION REPORT ON FORM 10-Q QUARTER ENDED MARCH 31, 1997 TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page Number ------ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) - CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997, AND DECEMBER 31, 1996 3 & 4 - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 5 & 6 - CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AS OF MARCH 31, 1997 7 - 9 - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AS OF MARCH 31, 1997 AND MARCH 31, 1996 10 & 11 - NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ITEM 2. NOTES TO THE FINANCIAL STATEMENTS 12 ITEM 3. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 13 PART II. OTHER INFORMATION AND SIGNATURES 14 2 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Balance Sheets
ASSETS ------ March 31, December 31, 1997 1996 ---------- ---------- CURRENT ASSETS Cash and cash equivalents $ 2,923 $ 90,987 Receivables - related parties 18,152 11,744 Total Current Assets 21,075 102,731 ---------- ---------- FIXED ASSETS, at cost, net of accumulated depreciation of $147,717 and $151,186, respectively 402,280 371,649 ---------- ---------- NET ASSETS OF DISCONTINUED OPERATIONS 532,006 683,190 ---------- ---------- OTHER ASSETS Construction-in-process 455,304 484,424 Notes receivable - related parties 125,990 140,171 Developer fees receivable 282,000 294,000 Development costs 1,223,436 1,216,036 Investments in limited partnerships 1,224,292 1,224,292 Other assets 4,079 5,201 ---------- ---------- Total Other Assets 3,315,101 3,364,124 ---------- ---------- TOTAL ASSETS $4,270,462 $4,521,694 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these consolidated financial statements. 3 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ March 31, December 31, 1997 1996 ---------- ---------- CURRENT LIABILITIES Accounts payable $ 305,266 $ 295,881 Other current liabilities 358,421 336,014 Lines of credit 70,520 76,006 Notes payable - current portion 395,132 797,100 Note payable to stockholder 29,792 27,914 ---------- ---------- Total Current Liabilities 1,159,131 1,532,915 ---------- ---------- LONG-TERM DEBT Notes payable - long term 2,190,578 1,829,951 ---------- ---------- Total Liabilities 3,349,709 3,362,866 ---------- ---------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock: 10,000,000 shares authorized at $0.01 par value; 672,300 and -0- shares issued and outstanding, respectively 6,723 6,723 Common stock: 250,000,000 shares authorized at $0.001 par value; 10,695,295 and 10,695,295 shares issued and outstanding, respectively 10,695 10,695 Additional paid-in capital 2,215,474 2,215,474 Accumulated deficit (1,312,139) (1,074,064) ---------- ---------- Total Stockholders' Equity 920,753 1,158,828 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,270,462 $4,521,694 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these consolidated financial statements. 4 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Operations March 31, March 31, 1997 1996 ---------- ---------- REVENUES Home building and development sales $ 704,288 $ - Property management and administration income 1,967 66,552 Commissions income 4,814 26,205 Other income 2,127 14,807 ---------- ---------- Total Revenues 713,196 107,564 ---------- ---------- EXPENSES Home building and development costs 698,150 - General and administrative 184,867 151,016 Depreciation and amortization 200 2,457 ---------- ---------- Total Expenses 883,217 153,473 ---------- ---------- LOSS FROM CONTINUING OPERATIONS 170,021 45,909 ---------- ---------- OTHER INCOME (EXPENSE) Interest income - 1,000 Interest expense (4,867) (13,516) Other expense (1,600) - ---------- ---------- Total Other Income (Expense) (6,467) (12,516) ---------- ---------- LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 176,488 58,425 INCOME TAXES - - ---------- ---------- NET LOSS FROM CONTINUING OPERATIONS 176,488 58,425 DISCONTINUED OPERATIONS Loss from operations of discontinued segment 61,587 59,289 ---------- ---------- Total Discontinued Operations 61,587 59,289 ---------- ---------- NET LOSS $ 238,075 $ 117,714 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these consolidated financial statements. 5 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Operations (Continued) March 31, March 31, 1997 1996 ---------- ---------- LOSS PER SHARE Continued operations $ 0.01 $ 0.01 Discontinued operations 0.01 0.01 ---------- ---------- LOSS PER SHARE $ 0.02 $ 0.02 ---------- ---------- ---------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,695,295 9,942,700 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these consolidated financial statements. 6 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Stockholders' Equity
Preferred Stock Common Stock Additional ----------------- ------------------------- Paid-in Accumulated Shares Amount Shares Amount Capital Deficit ------ -------- ----------- -------- ----------- ----------- Balance, March 31, 1994 - $ - 2,136,304 $2,136 $1,910,998 $(345,718) Stock issued for services - - 848,696 849 7,638 - Accrued dividends - - - - (10,200) - Class B stock issued for debt - - 184,900 185 369,800 - Class B stock issued for cash - - 16,250 16 32,299 - Stock offering costs charged to paid-in capital - - - - (69,080) - Net loss for the year ended March 31, 1995 - - - - - (321,864) ---------- ---------- ---------- ---------- ---------- ----------- Balance, March 31, 1995 - - 3,186,150 3,186 2,241,455 (667,582) Class A stock issued for services - - 20,000 20 19,980 - Class B stock issued for cash - - 50,000 50 99,950 - Accrued dividends - - - - (34.496) - Net loss for the period from April 1, 1995 to December 31, 1995 - - - - - (547,285) ---------- ---------- ---------- ---------- ---------- ----------- Balance, December 31, The accompanying notes are an integral part of these consolidated financial statements.
7 1995 - $ - 3,256,150 $ 3,256 $2,326,899 $(1,214,867) ---------- ---------- ---------- ---------- ---------- ----------- The accompanying notes are an integral part of these consolidated financial statements.
8 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Stockholders' Equity (Continued)
Preferred Stock Common Stock Additional ---------------------- --------------------------- Paid-in Accumulated Shares Amount Shares Amount Capital Deficit ------ -------- ----------- -------- ----------- ----------- Balance, December 31, 1995 - $- 3,256,150 $3,256 $2,326,899 $(1,214,867) Common stock issued to acquire Connectivity and Technology, Inc. - - 5,183,850 5,184 (5,184) - Conversion of Class B common stock to preferred stock 672,300 6,723 (672,300) (672) (6,051) - Common stock issued for cash - - 2,700,095 2,700 154,269 - Common stock issued for service - - 227,500 227 36,773 - Deferred stock costs charged to paid-in capital - - - - (265,810) - Accrued dividends - - - - (25,422) - Net income for the year ended December 31, 1996 - - - - - 140,803 ---------- ---------- ---------- ---------- ---------- ----------- Balance, December 31, 1996 672,300 6,723 10,695,295 10,695 2,215,474 (1,074,064) Net Loss for the period ended March 31, 1997 (238,075) ---------- ---------- ---------- ---------- ---------- ----------- Balance March 31, 1997 672,300 $6,723 10,695,295 $10,695 $2,215,474 $(1,312,139) ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ---------- ----------- The accompanying notes are an integral part of these consolidated financial statements.
9 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Cash Flows March 31, March 31, 1997 1996 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(238,075) $(117,714) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 200 478 Discontinued operations 151,185 868,461 Changes in operating assets and liabilities: (Increase) decrease in accounts and notes receivable 12,000 (110,000) (Increase) decrease in accounts receivable - related parties 7,772 7,494 (Increase) decrease in other assets (6,278) (194,966) Increase (decrease) in accounts payable 9,385 (42,283) Increase (decrease) in other liabilities 16,921 56,755 ---------- ---------- Net Cash Used by Operating Activities (46,890) 468,225 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Construction in progress 29,120 - Purchase of property and equipment (30,831) 1,188 ---------- ---------- Net Cash Used by Investing Activities (1,711) 1,188 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Due to shareholders 1,878 - Repayment of notes payable (401,968) (28,058) Proceeds from long-term borrowings 360,627 (742,010) Proceeds from stock offerings - 101,956 ---------- ---------- Net Cash Provided by Financing Activities $ (39,463) $ (668,112) ---------- ---------- The accompanying notes are an integral part of these consolidated financial statements. 10 PEACOCK FINANCIAL CORPORATION AND SUBSIDIARY (Formerly Connectivity and Technology, Inc.) Consolidated Statements of Cash Flows (Continued) March 31, March 31, 1997 1996 ---------- ---------- (12 Months) (9 Months) NET INCREASE IN CASH $ (88,064) $ (198,699) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 90,987 267,593 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,923 $ 68,894 ---------- ---------- ---------- ---------- SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Common stock issued for debt $ - $ - Common stock issued for services $ - $ - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid, net of amount capitalized $ 2,173 $ 13,516 Income taxes paid $ - $ - The accompanying notes are an integral part of these consolidated financial statements. 11 PEACOCK FINANCIAL CORPORATION NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 1997 1. The interim financial statements are prepared pursuant to the requirements for reporting on Form 10-QSB. The December 31, 1996, balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. The interim financial statements and notes thereto should be read in conjunction with the financial statements and footnotes thereto included in the Company's report on Form 10-KSB for the year ended December 31, 1996. In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. 12 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10-QSB contains forward looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward looking statements. RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1996. The Company is engaged in construction and real estate development. The Company's most recent developments are near the Eastside Reservoir, a $3 billion project under construction in Central Riverside County which will be the largest freshwater lake in Southern California. REVENUES. Revenues for the three months ended March 31, 1997, increased by $605,632 or 563% to $713,196 from $107,564 for the three months ended March 31, 1997. This increase resulted from increase in home building offset partially by decrease in property management and administration revenues. EXPENSES. Total expenses for the three months ended March 31, 1997, increased by $729,744 or 475% to $883,217 from $153,473 for the three months ended March 31, 1997. This increase resulted from higher general and administrative expenses and home building development costs. General and administrative expenses for the three months ended March 31, 1997, increased by $33,851 or 22% to $184,867 from $151,016 for the three months March 31, 1997. CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCE. For the three months ended March 31, 1997, the Company funded its operations and capital requirements partially with its own working capital and partially with loans from related parties. As of March 31, 1997, the Company had cash of $2,923. Net cash generated from the operating activities decreased to $46,890 compared to increase of $468,225 for the three months ended March 31, 1997 and 1996 respectively. The decrease resulted mainly from operations. Net cash used in financing activities decreased by $39,463 compared to decrease of $668,112 for the three months ended March 31, 1997 and 1996 respectively. At March 31, 1997 and 1996 the Company had $2,190,578 and $1,867,009 of long-term debt respectively. The Company is in the process to raise a three-year $10,000,000 loan for real estate development as well as for working capital. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PEACOCK FINANCIAL CORPORATION - ------------------ -------------------------------------------- Date Steven R. Peacock President and Chief Executive Officer - ------------------ -------------------------------------------- Date Joy M. Hunt Secretary/Treasurer 14